Markets “In a Nutshell” for January 9, 2023
Investment Week at a Glance
Stocks finished higher for the week. The Dow Jones Industrial Average rose 1.50%, the S&P 500 was up 1.40%, and the NASDAQ rose 1.00%. Foreign stocks (MSCI EAFE) were also up, rising 0.90%. Bond prices were up for the week, with the 10-year U.S. Treasury ending the week at 3.57%. (Data source: Wall Street Journal)
Job Market Remains Strong
When the Fed is in a rate hike cycle, it is typical for the job market to become weak, people to begin to lose their jobs, and unemployment rises. This has not been the case so far in this rate hike cycle as we continue to see job growth. The economy added another 223,000 jobs in December and unemployment fell to 3.5% which matches a 50-year low. The job market continues to be the one bright spot in the economy and causes some to question whether or not we are or will be in a recession in the coming year. Not only do we continue to see unemployment near all-time low levels, but we also currently have 1.7 open jobs for every unemployed person. This number is also near all-time high levels and shows the job market should continue to be strong in the near future.
Fed’s View on the Job Market
While good news on jobs data is typically positive for the market, that is not always the case such as now. The Fed sees the labor market continues to be strong and unemployment near all-time lows and sees this as a green light to continue to raise rates. The stock market typically has a negative reaction to rate hikes and if we saw unemployment rising rapidly, most believe the Fed would have paused rate hikes by now. The consensus belief is the Fed will raise rates a couple more times before pausing but if inflation remains high and unemployment remains low, we could see the Fed take a more aggressive approach and raise rates higher than expected. This would cause the market to take a dip as higher rates would continue to tighten margins and cause companies to have a slowdown in earnings growth.
How many job openings are there in the USA? (Scroll Down for Answer)
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4) 10.4 million. The latest report showed there are 10.4 million open jobs in the USA, this is why wage growth continues because companies need more workers and are willing to pay more to get people to work for them.